Question

Quantity	Total Revenue	Marginal Revenue	Total Cost	Marginal Cost	Fixed Costs	ATC	Average Fixed Costs	Average Variable Costs
0	0	-	10	-	10	-	-	-
1	8		24	14		24
2	16		34	10		17
3	24		42	8		14
4	32		49	7		12.25
5	40		57	8		11.4
6	48		67	10		11.17
7	56		81	14		11.57
8	64		99	18		12.38
9	72		123	24		13.67

1. 1b. At a price of $14, what is the profit-maximizing number the firm should produce each day? (note: Do not necessarily just look at economic profit. Look at marginal revenue and marginal cost. Pick the one where MR=MC).

2. 1f. What is the ATC associated with the profit-maximizing number you chose in 1b (and 1d)? (round to the nearest penny)

3. 2b. At a price of $10, What is the profit-maximizing number the firm should produce each day? (Again, do not necessarily just look at economic profit. Look at marginal revenue and marginal cost.)

4. 2c. What is the ATC associated with the profit-maximizing number you chose in 2b? (round to the nearest penny)

5. 2f. What are the total variable costs associated with the profit-maximizing number you chose in 2b? (round to the nearest penny)

Answer 1

Quantity	Total Revenue, TR	Marginal Revenue= Change in TR/Change in Q	Total Cost	Marginal Cost	Fixed Cost	ATC	AFC =FC/Q	AVC =(TC-FC)/Q
0	0		10		10
1	8	8	24	14	10	24.00	10.00	14.00
2	16	8	34	10	10	17.00	5.00	12.00
3	24	8	42	8	10	14.00	3.33	10.67
4	32	8	49	7	10	12.25	2.50	9.75
5	40	8	57	8	10	11.40	2.00	9.40
6	48	8	67	10	10	11.17	1.67	9.50
7	56	8	81	14	10	11.57	1.43	10.14
8	64	8	99	18	10	12.38	1.25	11.13
9	72	8	123	24	10	13.67	1.11	12.56

1b)

If price is $14

Firm will increase its production as long as MR is higher than or equal to MC to maximize profit.

We observe that MR (P)=MC at a output level of 7 units. So, optimal output is 7 units.

1c)

Refer to above table, ATC=$11.57 for a output level of 7 units.

2b)

If price is $10

Firm will increase its production as long as MR is higher than or equal to MC to maximize profit.

We observe that MR (P)=MC at a output level of 6 units. So, optimal output is 6 units.

2c)

Refer to above table, ATC=$11.17 for a output level of 6 units.

2f)

Total Cost at a output of 6 units=$67

Fixed cost=FC=$10

Total variable cost=TVC=TC-FC=67-10=$57.00